Availability of substitutes increases the demand elasticity. When there are many substitutes, prices of a given good decreases. And so there would be high percentage change in the quantity a good demanded (increases) and high percentage change in price (price decrease). The elasticity of demand hence becomes negative (inelastic). In other words, the demand elasticity is price and demanded quantity dependent. When the substitutes are many and cheaper, elasticity of the demand increases (Caldwell, 2003).

When a greater share of a person’s income is devoted to a given good, its demand increase and vice versa holds (Caldwell, 2003). When demand increases, price increases as well and so percentage change in price and quantity demanded would both increase. This would lead to increase in elasticity of demand (% change in demanded quantity divide by % change in price). Among the factors that affects demand is price of a good. For low cost goods, the demand tends to be more inelastic. This is because percentage change in demand is always higher than percentage change in price and hence the coefficient is always less than one. On the other hand, for high cost good, the demand tends to be elastic. The percentage change in price is always higher than the percentage change in demand and so the coefficient is always more than one.

For customer’s horizon, the demand would be high. It is the likelihood that a given quantity would be demanded more in future and so the clients would make more prior purchase before the price rise (Kowalski, 2005).